Ringgit continues to falter ahead of Malaysia Budget

KUALA LUMPUR • Malaysia's ringgit dropped for a fourth day ahead of the Budget tomorrow, when Malayan Banking says there is a possibility Prime Minister Najib Razak will announce higher taxes to compensate for the loss of revenue from oil.

While the currency has rallied with the rest of emerging markets this month, it is still Asia's worst performer this year as a decline in Brent crude cuts earnings for the region's only major net oil exporter.

Datuk Seri Najib will reveal measures to strengthen the ringgit, Trade Minister Mustapa Mohamed said in Parliament on Tuesday, after both the Prime Minister and the central bank governor earlier stressed there is no plan to revisit capital controls imposed during the Asian financial crisis.

"The ringgit continues to retrace lower on weaker oil prices and as the sell-off in the United States dollar looks to have run its course," said Mr Khoon Goh, a Singapore-based senior currency strategist at Australia & New Zealand Banking Group (ANZ).

"The Malaysian Budget will also be a focus for the market to see whether ongoing fiscal consolidation can be achieved in a tough environment."

The ringgit was trading at 3.0791 to each Singapore dollar at 5pm local time. The currency has dropped 18 per cent against the US dollar this year amid a 15 per cent slide in Brent crude, which has more than halved in price since its peak in June last year.

The Malaysian government wants certainty and stability in the ringgit, Mr Mustapa said.

Parliament reconvened this week following a scheduled break, with Mr Najib in the spotlight over political donations and the government's handling of an in-vestigation into state investment company 1Malaysia Development Berhad.

The government aims to cut the fiscal deficit to 3.2 per cent of gross domestic product this year from 3.5 per cent, after amending the target from 3 per cent in January.

Next year's shortfall is expected to be announced at 3 per cent in tomorrow's Budget, according to forecasts from ANZ, United Overseas Bank, Maybank and Affin Hwang Investment Bank.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 22, 2015, with the headline 'Ringgit continues to falter ahead of Malaysia Budget'. Print Edition | Subscribe